Vodafone swoops on Cegetel

Vodafone has delivered a knock-out blow in the tussle with Vivendi Universal to gain control of Cegetel, the French telecoms house. It is stumping up €6.3bn cash for the stakes held by fellow minority partners BT and SBC Communications, taking its share of the company to 56 per cent. And it has made a non-binding offer to buy Vivendi's 44 per cent in Cegetel for €6.77bn. This offer expires on October 30, leaving Vivendi with a very tight timetable to respond with a counter-offer.

Vivendi has pre-emption rights for Cegetel shares - it has until November 10 to match Vodafone's offer to BT. Also it has to beat the $2.27 bn cash offer to SBC by 13 per cent, according to Vodafone.

But where will Vivendi find the money? The company has debts of €19bn and there are serious doubts about its ability to service this. Vivendi's financial precariousness means that there will be no auction for Cegetel assets. And it also means that Vodafone is not paying top dollar - it says the transaction will be earnings enhancing

Vivendi had wanted to take its stake in the telco to above 50 per cent, enabling it to consolidate the company's balance sheet and strong cash flow. Failure to achieve this means that cash-strapped Vivendi may face problems in the future in paying down debt. But it can console itself with less jam today - Vodafone has tabled a non-binding offer of €6.3bn for its stake.

BT is to receive €4bn (£2.5bn) for its 26 per cent stake in Cegetel. This represents a return of 2.5 turns on its original investment, the company says. With this money banked, BT moves closer to its net debt target of £10bn, a mere bagatelle for a major-ish European telco. ®